Information from the Sirolli Institute. What we are doing, thinking and feeling about the development of Enterprise Facilitation and responsive systems of development.

Monday, 9 February 2009

Free Market and Capitalism are not synonyms!

Author: Dr. Ernesto Sirolli

I was checking the Internet when I came across a blog that used a quote from my book “Ripples from the Zambezi”.

The quote was: “ ...an economic system which is beyond capitalism, that is a system which enhances the participation in the creation of wealth, not only its accumulation.

Civic economy can be defined as the economy resulting from generalized reciprocity, from people helping people to succeed, with the understanding that the well-being of each member of the community is to everybody's advantage. Whereas unbridled capitalism destroys diversity, competition, and ultimately the market and has to be controlled with anti-trust laws, civic economy encourages diversity and supports small and medium companies and cooperatives with legislative and fiscal tools.

The result is an entrepreneurial economy where reciprocity matters”.

Someone, not a real name, left a comment that said, among many other things:

‘It is not the "free market" that causes these problems. The free market IS diversity, it IS the economic definition of "perfect competition." “.I thought that the comments above where very much against the role of the government in the economy but I answered in the following matter to make a point; it seems to me that Free Market and Capitalism are used as if they where the same thing and the two terms interchangeable.

Here is what I wrote, please let me know what YOU think.

“I agree with you. It isn't the free market that is the problem”. In my quote I said: "Unbridled capitalism destroys diversity, competition etc. not the free market". There is a tendency to confuse FREE MARKET with CAPITALISM and I don't understand how this can be. Free market is probably as ancient as humanity itself whereas Capitalism is only as old as the existence of surplus capital. Nobody had any surplus capital to invest as early as the 1600. Before that maybe a few families, the Medici and the Rothschild’s, had enough surplus capital to lend to kings and queens, but 99.99% of the European, not to mention the world population, had no surplus capital to invest.

Capitalism is NEW! And we are still learning what happens when it is left unchecked.

In my book I make the case for a “civic economy” that promotes entrepreneurship. I believe that one million small businesses employing 2 people each is better that one business employing 2 million people. This is because if that one big business goes bust the economy looses two million jobs. Do I advocate smallness? No. Certain businesses have to be big for scale reasons. But to have all the chicken in the USA produced by one company, or the beef, the cars and the software would be suicidal. Fortunately in the USA there are anti trust laws that protect us from unbridled capitalism. And to be protected from it we desperately need because we cannot allow the free market to be destroyed whether by communism OR by unbridled capitalism.